BUSSPP 20 1nd Edition Exam 4 Study Guide Lectures 18 19 Lecture 18 I Push Pull Marketing Perspective A Recall general supply chain layout B Main focus To whom what party does one particular player direct their promotion mix 1 Consider Manufacturer i e Matel Toys 2 No wholesaler a Could direct promotion mix to retailer i Retailer would then direct promotion mix to end user b Could direct promotion mix to end user ii Kids scream moms demand from the retailer C At one time pharmaceuticals could not be advertised directly to end users 1 Once this law was lifted begin the era of drug commercials a people go to their doctors I need D Push directing promotion mix downward 1 Pull end user s response of demanding from upstream II Push Pull Operational Perspective A Estimation of demand 1 Issues with actual demand a excess inventory b stockout 2 What if we didn t have to estimate demand B Manufacturer what if I don t do anything until I receive an order from the retailer 1 Retailer well then I m not ordering anything until the end user orders it 2 Upstream players use the same logic 1 Push estimating demand a Pull actual demand b In order for this kind of a system to work each player must work extremely close to the others C We re back to special relationships to make this work 1 Ex Toyota production system 2 4 different platforms 4 body styles 2 trim packages 2 engines 10 paint colors 5 interior choices a estimating demand for this is ridiculous b cut down production shipping delivery time to 3 4 weeks customer won t notice a difference but we eliminate MANY problems c This system must be very carefully orchestrated 3 Canon 4 Lincoln Electric D This is a PULL Kanban lean manufacturing Japanese Manufacturing System or agile system each player is pulling product from one player up 1 Virtually no finished product inventory anywhere in the system a all intermediate inventory is constantly in motion nothing is sitting around waiting 2 TPS Toyota production system 3 JIT just in time system 4 NONE of this will happen if solid trust is not established between players a critical to relocation of a manufacturing facility is the establishment of new partners coercion of old partners to co locate b expect to see the emergence of closely related upstream partners with the emergence of manufacturers 5 Increasing delivery frequency of intermediate raw material product allows for more concise control of stock inventory a Inventory amount moves closer and closer to 0 b Delivery costs go up but storage costs go way down 6 Benefits are significant every player reduces inventory a PROBLEM any issue upstream produces massive problems downstream b shocks that cannot be controlled by the trust system cause serious problems 7 Significantly greater efficiency traded for the fragility of the system to any disruption E PUSH system typical estimation of demand system Lecture 19 I 2 Different Kinds of Processes A Job Shop 3 Characteristics 1 General purpose equipment 2 Huge level of underutilization 3 Multiple paths a Optimal for multiple types of jobs B Continuous Flow 1 Highly specialized equipment 2 High level of utilization 3 Single path a Optimal for one specialized job C In these we find Production system vs Differentiation 1 Generic commodities 2 Custom made products a frontier between the two to address different levels of Differentiation b calls for some combination of the two kinds of processes c Caters to needs for different levels of flexibility and efficiency D Productivity 1 New entrants will want to utilize Continuous Flow to maximize productivity and minimize costs a after a simpler system is established it s pricey and rather difficult to upgrade it for a higher degree of differentiation 2 Players notorious for massive differentiation are unlikely to reduce it because customers have come to expect it a if the system is already designed for massive differentiation it makes no difference in production costs to downsize processes
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